Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) have managed to beat expectations this year, but their best known product, cable TV, is facing a difficult future, argues Slant’s Jeff Reeves. He points out that disruptive technology is on the rise and cable TV just doesn’t have a place in the modern world.
Cable TV Customers Balk And Walk Over Forced Package Pricing
Comcast Corporation (NASDAQ:CMCSA) lost another 60,000 of its cable TV customers last quarter, and it has lost more than 2 million in the last five years. That certainly doesn’t mean those former customers no longer want the content they were getting from Comcast, more likely they didn’t like how it was being delivered. Cable TV is still sold in packages that require customers to pay for channels they don’t want. In most packages a handful of sports channels represent the majority of content costs, even for people who hate sports, Derek Thompson explained in The Atlantic earlier this year.
Since most people have gotten used to getting the content they want for free online, the idea of paying for content that they don’t want is proving to be pretty unpopular.
Cable TV Offers Fewer Options Than Internet Viewing
Cable TV also suffers because no matter how many channels are available, internet-based services offer people content on demand. Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) continue to see growth in their streaming services, and Netflix has more subscribers than HBO. Reeves doesn’t mention the impact of piracy, but the ability to download nearly anything from peer-sharing sites gives people one more way to get the content they want without the cable box.
The one advantage that cable TV has enjoyed until recently is that people usually have better screens and speakers for their television than their computers, but as customers become more tech savvy many are learning how to connect the two. Devices that stream Netflix, Inc. (NASDAQ:NFLX) and Hulu onto a customer’s TV already exist, and major companies including Sony Corporation (NYSE:SNE) (TYO:6758), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL) are said to be moving into the market as well.
Net Neutrality Could Be The Next Big Content War
The one big advantage that companies like Time Warner Cable and Comcast Corporation (NASDAQ:CMCSA) still have is that they own the infrastructure underpinning their internet rivals’ business models. Net neutrality, the idea that infrastructure owners shouldn’t favor their own content, has been an undisputed tenet of the internet since its inception, but that doesn’t mean it will last forever.
If telecommunications firms decided to charge customers directly for accessing their competitors’ content, the scales could tip quickly towards the old guard. Whether such a move would be allowed by regulators is a question that has yet to be answered.